‘With increasing use of data analytics tools, tax department’s capabilities of data mining have increased manifold’–08.11.2017

What’s the impact on tax base and tax collection as a result of demonetisation?

Cash held in old high denomination notes lost its anonymity as it had to be deposited in bank accounts. Tax department, in collaboration with many other agencies, has been tracking such cash. Care is taken to ensure that genuine cash depositors do not face trouble. As a result of organised efforts under operation clean money, both tax collections as well as the tax base have shown a growing trend post-demonetisation. There is increase of 17.6% in number of ITRs filed under all categories till October 30, with 23% increase in ITRs filed by individuals. The increase in number of ITRs and tax collection shows the positive effect of demonetisation.

What is your strategy on shell companies and how much impact will it have on tax evasion?

Crusade against shell companies and associated persons has been one of the most important measures taken by the government in recent past. Pursuing a whole of government approach, the task force headed by the revenue secretary and secretary, ministry of corporate affairs, has been closely monitoring coordinated actions by all law enforcement agencies. As part of this drive, large number of shell companies have been deregistered by MCA and their directors are being disqualified. Apart from taking punitive actions, tax department has shared data of over 22,000 beneficiaries identified in the enforcement actions, evading income of over Rs 13,300 crore through 1,155 shell companies. Criminal prosecution complaints were filed in 47 cases and actions for criminal prosecutions in more than 100 cases of entry operators/ beneficiaries identified is under way.

With collection of so much data, will 360 degree profiling become more effective?

Several inputs go into 360 degree profiling. The data collected post demonetisation will further help in profiling as the same has to be matched with the tax profile of relevant persons. Such data will help in identifying new assessees who have not filed returns so far. We will also be able to find out whether persons filing the returns have disclosed cash deposits correctly or not. During this year we have asked information about the amount of cash deposited during demonetisation. The same will be matched with the data collected from different reporting entities. This will help us in widening and deepening of tax base.

Can you elaborate how data mining is done in income tax?

Data mining involves various processes and it wouldn’t be appropriate to go into details of the process. However, with the increasing use of information technology and advanced data analytics tools, tax department’s capabilities of data mining have increased manifold in recent months. These are going to get further strengthened with operationalisation of our data warehousing and business intelligence project called ‘Project Insight’.

What’s the success of your PEPs (politically exposed persons) strategy?

We take action against cases of tax evasion, particularly those involving large amounts. Such evaders may belong to any stream including political domain. The department does not distinguish between political and non-political persons.

The impression in industry and among people in general is that tax department has become too intrusive. How do you address that?

The impression is misconceived. Our emphasis is on voluntary compliance. The intrusive actions are taken only in a handful of cases which deserve it. Even during demonetisation, for verification of data we introduced operation clean money which obviated the need of personal visit to the income tax offices. We enquired about source of money through email and wherever the explanation was satisfactory, no further action was taken. During this year we have selected less than 1% cases for scrutiny out of returns filed in last year, accepting 99% cases. This shows that the department largely believes in tax payers and cases are taken up for scrutiny only where there is prima facie evidence of tax evasion.

Is there a need for a new Direct Tax Code?

Income Tax Act has been a dynamic instrument for furthering overall economic policy of the government. The issues of bringing in new tax code are being examined by the Central Board of Direct Taxes. Our aim is to create a tax compliant society through fair, transparent and non-intrusive tax administration where every tax payer takes pride in paying taxes.

via ‘With increasing use of data analytics tools, tax department’s capabilities of data mining have increased manifold’

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